China Issues Some Restrictions On Coal-to-Liquids Developments

20 July 2006

The Chinese government has issued a circular on regulating the coal-chemical industry, urging local governments to tighten control of new projects.

The government will not approve coal liquefaction (Coal-to-Liquids) projects with an annual production capacity of less than three million tons; coal to methanol or dimethyl ether (DME) projects of less than one million tons; and coal-to-alkene projects of less than 600,000 tons, according to a circular released by the National Development and Reform Commission (NDRC).

According to the NDRC, constantly rising oil prices on the world market have prompted the development of the coal-chemical industry in trying to find alternatives for petroleum in China. The NDRC is trying to avoid the construction of excessive overcapacity in case the price of oil drops sharply. When all the projects go into production, a surplus capacity is inevitable, said NDRC.

China’s methanol production capacity reached 5.36 million tons by the end of 2005. According to incomplete statistics, current methanol production capacity under construction is nearly nine million tons, with more than 10 million tons under planning.

According to the NDRC, as the technology is still in experimental phase, coal liquefaction projects should not be approved until a national development program for the industry is completed.

Coal-chemical projects must meet environmental requirements and those that fail to meet the safety requirements in transportation should not be allowed, said the NDRC.

Chinese companies have a number of large-scale CTL projects underway, with partners such as Sasol and Shell. (Earlier post.)

Comments

Some puzzling statements here like 'avoid the construction of excessive overcapacity in case the price of oil drops sharply'. This contrasts with Western thinking that no petroleum replacement can even come close. Perhaps the Chinese are expecting a recession. Also note that low greenhouse emissions are not explicitly given as an 'environmental requirement'.

Aussie,
This oil shale development might shake things up!
http://www.businessweek.com/globalbiz/content/jul2006/gb20060705_516609.htm?chan=globalbiz_europe_energy
At >$20 a barrel, it could be a game changer. It could buy us time to move onto green energy. US govt could use it to cut the deficit, tackle/restructure future obligations, fund R&D and deployment of cleaner energy. Waste material and kerogen to syncrude upgrading would have to be dealt with though.